Thursday, 9 October 2014

Companies Act 1956: Debentures

Debentures are the loans taken by
any company from the public hence debenture is a type of loan capital raised by
any company. Debentures have the following features:

Debenture holders do not have any voting rights.

Debentures have a fixed rate of interest.

Debenture Holders do not participate in management of company.

Debenture Holders are not the owners of company.

Debentures are of different types and depending upon their type company
may issue debentures according to need.

Debenture Certificate:

Every company issuing debentures
must issue debenture certificate within 3 months of the allotment of
debentures, hence the debentures must be issued in the form of certificate
after allotment. In this case if the company commits a default the company and
its directors are liable to punishment which may be 2 years imprisonment or
fine of Rs. 5000 per day of the default.

Debenture Redemption reserve:

It is a fund created by the company for
redemption of debentures. According to the companies act and also according to
the SEBI guidelines it is compulsory for the company to issue debentures and
the company must create a DRR for the redemption of debentures.Also Read: